(Boston, MA) – UBS Bank issued a recommendation of “neutral” for Boston Beer Company last week, citing maturity as a reason for what it sees as limited upside. In doing so, the Swiss bank released not only a full report for the brewery but a report on the craft segment, as a whole. Here is one snippet on the so-called “brewery bubble.”
Despite the rapid increase in new brewers, craft volume has outpaced brewer growth over the last three years. As a result, craft volume per brewer has increased from 5,918 bbls in 2008 to 6,321 (we will refer to this as “entrant opportunity”). While the entrant opportunity for craft brewers is growing, its rate of growth is slowing. We believe this is indicative of the brewer bubble nearing its peak.
We are beginning to reach a brewer saturation point, with the slowing entrant opportunity growth. Additionally, the proliferation of brands and SKU’s has made it increasingly difficult for distributors and retailers to allocate space. Small Craft brewers have disadvantaged economies-of-scale and resources. Should volume growth slow, we will enter a period of rapid consolidation, where the surviving brewers will have a greater share of the category.
Bubble or no bubble?
The full report is available at Brewbound.